Selling A Family Business – Without Tears
Selling a family business, especially a closely-held one, is an emotional thing to go through, and one with plenty of stressful practicalities.
To help you through, here’s our guide for how to make it as easy and profitable as possible.
Timing
Timing is critical.
Look at external market factors. Would your business fetch a decent sum at the moment? Are its services in demand? If not, when is that likely to change, and can you hold on long enough to see the improvement?
Internal factors also matter.
What changes in the family might affect the sale? Are upcoming births or marriages likely to create distractions?
Are working relationships under strain so that a faster sale might create long-term benefits at home?
Is there a time when the sale would fit nicely with everyone’s life plans? If you’re selling to retire, don’t leave it until the last minute.
That will limit your options and reduce the value you can get.
Have a Plan for After
Before you get into the sale, consider what you’re going to do once it’s complete. Will you start a new business with the money? Is it time to retire?
Are you going to live off the profits while pursuing hobbies or family work?
Knowing this will shape your approach to negotiations, in terms of the funds and the timing you’re after. It also reduces the risk of seller’s regret.
You don’t want a sense of purposelessness in the aftermath to turn into doubt about your decision.
Meet with Stakeholders
Before starting work on the sale, meet with the significant people who will be affected.
This obviously includes family members who work within the business but might also include others in the family who have taken an interest.
You might also want to include senior figures in the business from outside the family – after all, this will affect them and you’ll need their cooperation for a smooth sale.
In the meeting, cover what you have planned and how you’re going to go about it. Knowing where they stand will reassure everyone about a potentially tumultuous event.
Decide Who’s Leading
You may want to lead the negotiations yourself. If not, pick someone else for that role. Be very clear on who that is and the limits of their authority and responsibilities.
Whether or not someone else is negotiating, find a professional to coordinate the sale.
This should be someone with experience of business sales, possibly a lawyer, accountant, or other relevant specialist.
Make them the central hub for the tasks involved, such as due diligence work, tax planning, and arranging negotiations.
There are a lot of details to cover and you need to make sure they’re dealt with.
Understand Your Value
Investigate the value of your business, looking at your profits, your assets, your future prospects, and comparisons with others who have sold.
Based on this, work out what you want to sell for and what you’re willing to go down to. Balance ambition and realism in the two figures.
Also consider whether you’re willing to take longer over completing the sale to get a good price. This might help financially but will create more work
Decide on Non-Negotiables
Determine your conditions for a sale. For example, do you want to protect the jobs of your staff or ensure that the business keeps its current name?
Due Diligence
Once you’ve found a potential buyer, carry out due diligence on them. Do they have the financial clout to both complete the purchase and maintain the business once it’s theirs?
Are their working conditions good enough for the staff you’re leaving behind? Are they responsible about pensions? Do you trust the people at the top?
You don’t want to sell the business you’ve put your sweat and tears into, only to see it destroyed by someone else’s weaknesses.
So unless you really don’t care about what you’ve created, take time to make sure it’s going into good hands.
Agree any handover period
With the buyer selected and the price negotiated, agree a handover period and what will happen in that time.
A smooth handover, with you cooperating with the new owners, will support the long-term survival of the business, protecting your legacy and your reputation.
Communication
Throughout, take care over communication. It’s important to keep family in the loop, as this business is important to their lives.
But that doesn’t mean telling everyone everything. You might want to keep a tight lid on the negotiations to avoid disrupting business.
You probably can’t keep them a complete secret, so to avoid creating bad feelings, let employees know that a sale is in the works, and how you’re working to protect their jobs.
Selling a family business is a big step, but with due care and clear communication, it doesn’t have to be an excessively stressful one.
Paul Connolly
Paul Connolly has been a journalist for more than 20 years, as a reporter and editor for Argus Media, Reuters, The Times, Associated Newspapers and The Guardian. He has covered Islamic Finance for Reuters in the 1990s. Paul has since helped launch three newspapers, as well as reported from Tokyo, Los Angeles and Stockholm.
